Feb 25, 2009
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Saks, TJX see no respite in consumer cutbacks

Feb 25, 2009

Saks Fifth Avenue à New York

* Saks Q4 loss $0.52, deeper than Wall St. view $0.30

* TJX Q4 EPS ex-items $0.55 vs Wall St view of $0.51

* TJX to outline major cost cuts, gives no outlook

* Saks CEO seeks to quash bankruptcy "rumors"

* Saks shares rise as much as 16 pct, TJX up 7 pct

By Aarthi Sivaraman

NEW YORK, Feb 25 (Reuters) - Fashion sales fell victim to consumer cutbacks during the holidays and no respite is in sight this year, but upscale store chain Saks Inc (SKS.N) and off-price retailer TJX Cos Inc (TJX.N) signaled to investors they were working hard to weather the storm.

Suffering the worst holiday season in nearly four decades, Saks posted a deeper-than-expected quarterly loss on Wednesday as even its more affluent shoppers headed to sales racks. [nN25353887]

TJX, which buys fashion brands at below wholesale prices and sells them at deep discounts, posted a profit that was better than expected, but its sales were flat, indicating that even thrifty consumers were not spending too much. [nN25424054]

TJX shares rose 7.2 percent to $23.09. Saks' shares fell as much as 8 percent, but reversed those declines to rise as much 16 percent before falling back again after its Chief Executive Steve Sadove quashed what he said were rumors the company might seek bankruptcy protection.

"Bankruptcy would destroy shareholder value," Sadove told analysts on a conference call. "Our intent and focus is to increase shareholder value."

Saks' shares were up 7 percent at $1.98 in late-morning trading.

Both TJX and Saks expect the ravages of the past months to continue, with TJX declining to give a full-year forecast, citing the uncertain economic environment.

Saks went a step further, indicating that consumer thrift due to the economic downturn may not end anytime soon.

"We expect the economic environment will remain extremely challenging throughout 2009, if not beyond," Sadove said. The company said it was still committed to luxury, would intensify its focus on some brands, and expects to have ample liquidity this year.


Retailers across the spectrum, from Saks and Nordstrom (JWN.N) to mid-priced department store chains J.C. Penney (JCP.N) and Macy's Inc (M.N), have been hurt deeply by the recession and took deep discounts on merchandise to lure shoppers.

Sadove said the downturn "perhaps is the most challenging that the company has faced in its 84-year history." Saks posted a net loss of $98.8 million, or 72 cents a share, in its fiscal fourth quarter, compared with a profit of $39.5 million, or 26 cents per share, a year earlier.

Excluding asset impairment, severance expenses and other items, Saks lost 52 cents a share, far greater than the average analyst expectation of a loss of 30 cents a share, according to Reuters Estimates.

Revenue fell 14.9 percent to $835.5 million. Saks' New York City flagship store remained weak, with sales of women's clothes suffering the most.

The retailer plans cost cuts of $50 million to $60 million in the current year from previously announced job reductions and other measures. It also plans to reduce capital expenditures to $60 million -- down over 50 percent from 2008.


At TJX, net profit fell to $250.9 million, or 58 cents a share, in the fiscal fourth quarter, ended Jan. 31, compared with $301.1 million, or 66 cents a share, a year earlier.

Excluding items, it earned 55 cents a share, topping the average estimate of 51 cents a share.

Sales were flat at $5.4 billion, showing that shoppers at even its off-price stores were careful about spending money.

TJX, whose retail chains include T.J. Maxx, Marshalls, HomeGoods and A.J. Wright, buys excess merchandise at below-wholesale prices and sells it at up to 60 percent less than department stores and specialty retailers.

For the fiscal first quarter, TJX forecast earnings of 32 cents to 38 cents a share from continuing operations.

TJX expects the first half of the fiscal year to be more challenging, and is implementing "major cost reductions," which it expects to discuss later on Wednesday. The company declined to issue a full-year outlook.

(Reporting by Aarthi Sivaraman; Editing by Brian Moss)

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